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Chapter 6 Demo Solution

Chapter 6 Demo Solution - BriefExercise61(30minutes 1...

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Brief Exercise   6-1  (30 minutes) 1. The new income statement would be: Total Per Unit Sales (8,050 units) $209,300 $26.00 Less variable  expenses   144,900       18.00     Contribution margin 64,400 $      8.00     Less fixed expenses     56,000     Net operating income $        8,400     You can get the same net operating income using the following  approach. Original net operating income $8,000  Change in contribution margin  (50 units  ×  $8.00 per unit)         400       New net operating income $8,400   2. The new income statement would be: Total Per Unit Sales (7,950 units) $206,700 $26.00 Less variable expenses   143,100       18.00     Contribution margin 63,600 $      8.00     Less fixed expenses     56,000     Net operating income $        7,600     You can get the same net operating income using the following  approach. Original net operating income .............. $8,000  Change in contribution margin  (-50 units  ×  $8.00 per unit) ................       (400     ) New net operating income ................... $7,600  
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Brief Exercise 6-1  (continued) 3. The new income statement would be: Total Per Unit Sales (7,000 units) $182,000 $26.00 Less variable expenses   126,000       18.00     Contribution margin 56,000 $      8.00     Less fixed expenses     56,000     Net operating income $                    0    Note: This is the company's break-even point.
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Brief Exercise 6-2  (30 minutes) 1. The CVP graph can be plotted using the three steps outlined in the  text. The graph appears on the next page. Step 1. Draw a line parallel to the volume axis to represent the  total fixed expense. For this company, the total fixed expense is  $12,000. Step 2. Choose some volume of sales and plot the point  representing total expenses (fixed and variable) at the activity level  you have selected. We’ll use the sales level of 2,000 units. Fixed expense ......................................................... $12,000 Variable expense (2,000 units  ×  $24 per unit) .........   48,000     Total expense .......................................................... $60,000 Step 3. Choose some volume of sales and plot the point  representing total sales dollars at the activity level you have  selected. We’ll use the sales level of 2,000 units again.
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